WiAV is the purported exclusive licensee of seven patents relating to aspects of signal transmission and data encoding/decoding owned by Mindspeed Technologies, Inc. In 2009, WiAV sued a set of companies including Motorola, Inc.; Nokia Corporation; Palm, Inc.; and Sony Ericsson Mobile Communications (USA), Inc. for infringement of the Mindspeed patents. The defendants contended, and the district court agreed, that WiAV lacked constitutional standing to assert the patents because WiAV is not an exclusive licensee of the patents under Textile Productions, Inc. v. Mead. Corp., 134 F.3d 1481 (Fed. Cir. 1998), which they argued holds that a party cannot be an exclusive licensee of a patent when a third party has the right to license the patent.

In reversing the district court's dismissal, the CAFC rejected this argument, instead holding that "a licensee is an exclusive licensee of a patent if it holds any of the exclusionary rights that accompany a patent." Slip. Op. at 17 (emphasis added). This decision is in the vein of the court's earlier decision this year in Alfred E. Mann Foundation For Scientific Research v. Cochlear Corp., 604 F.3d 1354, in which it concluded that a licensee is an exclusive licensee of a patent despite retaining the ability to license the patent to settle lawsuits.

Scope of the LicensingThe licensing rights at issue were held by six third parties, and stemmed from a series of spin-offs and other agreements that occurred as the patents were transferred from company to company. For example, when Rockwell International Corporation, the original owner of the Mindspeed patents, assigned them to Conexant, the second owner, its subsidiary, Rockwell Science Center, received a limited, non-exclusive license to use the patents in connection with its business, along with the right to sublicense to Rockwell International and its "Affiliates," or to transfer the license in connection with the sale of the respective businesses to which the intellectual property rights relate. The district court found that several of these licensees retained a limited right to license the patents in the field of wireless handsets, and concluded that under Textile Productions, WiAV could thus not be an exclusive licensee of the Mindspeed Patents.

Any Exclusionary RightsOn appeal, the CAFC rejected the argument that, under Textile Productions "a licensee cannot be an exclusive licensee of a patent if others retain the right to license the patent." Slip. Op. at 11. Turning straight to the constitutional analysis, the court held that the standing determination focuses only on whether a party has any exclusionary right in a patent:

Because the legally protected interests in a patent are the exclusionary rights created by the Patent Act, a party holding one or more of those exclusionary rights—such as an exclusive licensee—suffers a legally cognizable injury when an unauthorized party encroaches upon those rights and therefore has standing to sue. …Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury. Contrary to the suggestion of the Defendants, neither this court’s Textile Productions nor Mars decision freed the constitutional standing inquiry from its legal injury mooring.

Slip Op. at 14-15. Textile Productions, on the other hand, involved only the narrow question of whether a particular type of contract, a requirements contract for a patented product, automatically converts the exclusive supplier into an exclusive licensee. "Nowhere did the Textile Productions court suggest that a party holding one or more of the exclusionary rights in a patent does not have standing to sue to protect those rights against infringement by an unauthorized third party. Nor is there any indication that the court created a bright-line rule that a party cannot be an exclusive licensee of a patent if others have the right to license the patent." Slip. Op. at 16.

The CAFC did impose one important limitation on the broad rule for standing: "Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights." Slip Op. at 17. Thus, an exclusive licensee may have standing to sue some parties, but not others; it may also lack standing to sue a party who has the ability to obtain a license from another party with the right to grant it.

Applying its holding, the court concluded that none of the pre-existing licenses granted the right to license the Defendants to practice the patents in WiAV's field of exclusivity, and thus WiAV possessed constitutional standing for this case.

Note: WiAV does not disturb the requirement that "[a]n exclusive licenseee generally must join the patent owner to the suit to satisfy prudential standing constraints, i.e., the 'judicially self-imposed limits on the exercise of federal jurisdiction.'" Slip Op. at 14-15, fn. 1. Here, WiAV had satisfied those concerns by adding Mindspeed to the suit as the "defendant patent owner."

Max’s understanding of “sole license” (I retain the right to exploit the patent, but I won’t grant rights to anyone but you) and “exclusive license” (I don’t retain any right to exploit the patent, AND I grant rights ONLY to you) is entirely correct. But that’s an entirely different use and definition of “exclusive” than is used by the court in this case. They have thrown out such old definitions. Many folks don’t seem to know or understand such tried and true usage of such terms anyway, these days….

Previously, the court has focused on an “all substantial rights” test… so that a defendant wouldn’t be confronted by multiple plaintiffs over the same patent. That was only given a passing mention in this decision…

Now, patent owner A can give an “exclusive” license to B in territory 1 (e.g., a first single state) and an “exclusive” license to C in territory 2 (e.g., a second single state). The way the court used “exclusive” it meant that no one other than the licensee had rights from the patent owner in those locales. (Rights could also be divided up by a “field of use” or any other “exclusive” scheme (others can’t go THERE… whatever THERE is defined to be in YOUR LICENSE AGREEMENT) that you might want to think up…)

So, alleged infringer Z, who sells product in the first state and in the second state, will be subject to suit by plaintiff B with respect to the first state, and by plaintiff C with respect to the second state. Not to mention patent owner A in either of those states, or by other plaintiffs in yet other states or territories….

Or, as an alleged infringer, you might be the target of an action by different plaintiffs if you have products or processes in each of the different “fields of use” where an “exclusive” license has been granted… No mention is made of the patent owner… (or there wouldn’t be a standing issue in the case )

Will be VERY interesting to see how many courthouse doors this actually opens up….

Since you have both read the opinion, can you please clarify if there were any facts discussed that would explain why the Court thought it impossible for the defendant to obtain a licanse from one of the other parties?

I recall that the ability of the other licensees was conditioned on purchase of the related businesses. Was there some reason the defendant could not have purchased the related businesses? Is there any reason to think that the ability of the other licensees to grant the license to the defendant must be unconditional, or else it basically doesn’t count?

Now, if you would, please explain why this holding should be applicable only to field-of-use licenses.

Okay, fair point. After looking through the decision, the reasoning regarding whether Skyworks or Qualcomm could license the defendants has nothing to do with their fields of use. In fact, both Skyworks and Qualcomm had limited abilities to license other entities in the same field as WiAV. So it looks like this decision is broader than I originally anticipated. My bad.

From the fact that the license on which the case focuses is a field-of-use license.

What about the fact that the license was granted to a company whose name begins with a “W”? Does this mean that the case only applies to licensees with a “W” at the beginning of their names? Or perhaps the case only applies to patent licenses where exactly 6 entities other than the licensee retain rights under the patents?

I don’t think you get to arbitrarily make up your own points of distinction. I suggest reading the court’s discussion of the law again – a distinction between field-of-use licenses and other licenses does not factor into that discussion. For instance:

This court therefore holds that an exclusive licensee does not lack constitutional standing to assert its rights under the licensed patent merely because its license is subject not only to rights in existence at the time of the license but also to future licenses that may be granted only to parties other than the accused. If the accused neither possesses nor can obtain such a license, the exclusive licensee’s exclusionary rights with respect to that accused party are violated by any acts of infringement that such party is alleged to have committed, and the injury predicate to constitutional standing is met.

Now, if you would, please explain why this holding should be applicable only to field-of-use licenses.

Well, this seems to only deal with field-of-use licenses. So, if you’re dealing with a licensee that is licensed to use the patented invention for all fields of use, then this case would not apply.

Hmmm… Where do you get this from?

From the fact that the license on which the case focuses is a field-of-use license. If your client’s license is to all fields of use, then your client does not have a field-of-use license; your client has a general license. Whether the license is a field-of-use license or not would strike me as a point of distinction as to whether this case applies.

Well, this seems to only deal with field-of-use licenses. So, if you’re dealing with a licensee that is licensed to use the patented invention for all fields of use, then this case would not apply.

Hmmm… Where do you get this from?

As a plaintiff, the safe way to go is to just join every licensee you can find. However, there are potential practical problems with that approach.

Not to mention legal problems. You’re confusing prudential and constitutional standing issues. If you can’t be injured, and thus don’t meet the constitutional standing requirements, you’re not allowed in court, no matter how many other people you join.

Well, this seems to only deal with field-of-use licenses. So, if you’re dealing with a licensee that is licensed to use the patented invention for all fields of use, then this case would not apply.

However, if you’re dealing with field-of-use licensees, then you need to focus on the breadth of the plaintiff licensee’s field of use, and whether the fields of other field-of-use licensees overlap with the plaintiff’s field. If there is overlap, then you need to analyze whether the defendant’s conduct falls within that overlap.

As a plaintiff, the safe way to go is to just join every licensee you can find. However, there are potential practical problems with that approach.

The result may very well be correct, but perhaps someone should look up the definition of the word “exclusive.” It doesn’t seem to fit here. It appears that one doesn’t actually need to be the “exclusive licensee,” so maybe we should change the terminology.

TINLA: Unless I am missing something, it seems to me the ruling must be that the licensee is an exclusive licensee with standing to sue a defendant despite other licensees having the ability to license to the defendant. If that is the case, then doesn’t it follow that the standing will not be terminated unless and until the defendant actually obtains a license from one of the other licensees?

You are missing something.

TINLA: But then there’s this part:

the court concluded that none of the pre-existing licenses granted the right to license the Defendants to practice the patents in WiAV’s field of exclusivity, and thus WiAV possessed constitutional standing for this case

That part really makes it sound like the Court would have concluded that WiAV would not have had standing to sue the defendant if any of the other licensees had “the right to license the Defendants to practice the patents in WiAV’s field of exclusivity.”

the court concluded that none of the pre-existing licenses granted the right to license the Defendants to practice the patents in WiAV’s field of exclusivity, and thus WiAV possessed constitutional standing for this case

That part really makes it sound like the Court would have concluded that WiAV would not have had standing to sue the defendant if any of the other licensees had “the right to license the Defendants to practice the patents in WiAV’s field of exclusivity.”

I remain uncertain about whether the licensee has standing to sue if another licensee, or the licensor, has the ability to license the patent to the defendant.

In particular, I am puzzling over this part of Jason’s article:

“The CAFC did impose one important limitation on the broad rule for standing: ‘Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights.’ Slip Op. at 17. Thus, an exclusive licensee may have standing to sue some parties, but not others; it may also lack standing to sue a party who has the ability to obtain a license from another party with the right to grant it.

That last part seems to raise more questions than it answers. Let’s review the cases.

In the Cochlear case, the licensor retained the ability to license the patent to settle lawsuits. So theoretically, the defendant could have sued the licensor and gotten a license that way. But that did not prevent the licensee from being deemed an exclusive licensee with standing to sue the defendant.

In the WiAv case, some licensees had the right to transfer the licenses to anyone who purchased the related businesses. So the defendant could theoretically have purchased those businesses; how is that substantially different fromt he ability to purchase a license straight out?

Unless I am missing something, it seems to me the ruling must be that the licensee is an exclusive licensee with standing to sue a defendant despite other licensees having the ability to license to the defendant. If that is the case, then doesn’t it follow that the standing will not be terminated unless and until the defendant actually obtains a license from one of the other licensees?

In the above writing, it is stated that “a licensee is an exclusive licensee of a patent despite retaining the ability to license the patent to settle lawsuits.” It is confusing because it may mean that a licensee retains such ability.

But, in the original court doc, it is stated that “a licensee was an exclusive licensee of a patent despite the licensor retaining the ability to license the patent to settle lawsuits.” That is, the licensor does retain the ability of settling lawsuits.

I think Cy has it right: a field-of-use licensee may have an exclusive license to its particular field of use, thereby giving said licensee the ability to enforce the patent against infringers practicing in said licensee’s field of use. What matters is whether the defendant’s potentially infringing activity occurs solely within the plaintiff’s exclusive field of use.

From an enforcement standpoint, this can make bringing a case against an infringer a bit easier, as it potentially obviates the ordeal of trying to join an additional field-of-use licensee who is reluctant to engage in litigation.

I’m a licensing guy, and I think that this case makes for some interesting hair splitting, but let me see if I can distill this into a simpler fact scenario:

* A owns the patent.
* A licenses B (with the right to sublicense certain parties C and D).
* A licenses E exclusively [ed. exclusive in this sense means exclusive from this point forward] in the Field of Use with the right to sue for infringement.
* E sues X, Y and Z.

At the heart, the argument XYZ make is that E doesn’t have standing to sue because of the rights to license C and D. And furthermore because it’s possible that C and D could also license them.

The sum of the opinion is that as of date of the litigation, E is harmed by XYZ’s infringement and because BCD have not done anything to help XYZ (grant a license, for example), this is no barrier to E’s standing.

There is some logical gymnastics going on here because in fact the harm is a bit illusory. There would be no harm if XYZ were licensed by BC or D and if there was a license E would receive nothing from it.

I will say that my reading of this case makes it seem like it actually muddies the waters a bit because you can imagine an infinite number of scenarios by which the downstream exclusive licensee isn’t much of an exclusive licensee, but would nevertheless retain the right to sue.

The real analysis question seems to be: is the accused infringer operating in a situation in which the exclusive licensee is exclusive at the time of filing?

Is there no difference then, between an “exclusive licence” and a “sole licence”? Me, I thought the difference was that the patent owner excludes even itself, when granting an exclusive licence (but not when granting a sole licence).

There’s no difference with respect to the constitutional standing analysis. In both cases, it’s pretty easy to see how the licensee is harmed by third-party infringement, and thus to see why the licensee should be allowed to sue.

In this case, the Federal Circuit has put a gloss on the term “exclusive licensee” in the context of determining standing to sue. Whether or not their interpretation has any impact outside a standing analysis, as a drafter of licenses I would be wary of relying exclusively on magic phrases like “exclusive license” or “sole license” to define the parties’ rights.

Cy, thanks for the explanation but I’m still not quite clear. Is there no difference then, between an “exclusive licence” and a “sole licence”? Me, I thought the difference was that the patent owner excludes even itself, when granting an exclusive licence (but not when granting a sole licence). If the patentee A grants an exclusive licence to B and then purports to grant C a permit (licence) in the field/territory of the previous exclusive licence grant, is that later grant of permission effective. Will it give C a defence to infringement proceedings brought against it by B?

So A licenses to B and C, that’s by definition non-exclusive … or maybe ‘exclusive’ to those two … then C licenses to D exclusively. D has standing to sue all but B because it got it’s license elsewhere? Anyone else understand it this way or care to clarify it better?

An exclusive licence is when even the licensor has no licence to perform the aforesaid act.

You’re wrong at least here, Max. At least with regards to standing issues, the fact that the licensor retains a right to practice the invention does not detract from the exclusivity of an alleged exclusive license.

It’s certainly well known that a patent owner can grant several licenses, and perhaps even several “exclusive” licenses, if carved up by field of use and/or territory. The defendants here argued (successfully at the district court) that a license can’t be regarded as “exclusive” if there are other licensees running around with the right to grant further sublicenses in the relevant field of use. The implication of this, based on previous case law, is that a non-exclusive licensee can’t be injured (in a constitutional cases-or-controversy sense), since he can’t completely control further expansion of the right to use the invention.

As Dennis says, the Federal Circuit focused on the injury analysis. They reasoned that unless the defendants could show that they could have obtained a license from one of these other licensees, then the plaintiff had a right to exclude them, if not everybody.

In effect, as TINLA says, the Federal Circuit removed any sense of “only” from the term “exclusive licensee,” emphasizing the “right to exclude” meaning instead.

From the posting, I will say the Court is saying that an exclusive licensee is the one who has the only rights to exclude others, but not the ones having the ability to obtain a license froma another party with the right to grant it.

However, even though my interpretation to the Court is stated above, I still don’t quite know what the heck the Court is saying. Could someone help me with it?

In this case, it looks like the other parties who had the right to license the patents did not have the right to license the patents to the defendants. So this is not a cse where the defendants could have gone to those other parties and made a deal with them to avoid the suit, thus undercutting the plaintiff’s negotiating position.

I wonder if there is any reason to think that a different result could obtain if the other exclusive licensees do have the right to license to the defendants.

In other words, it appears that the Corut is interpreting “exclusive licensee” as one that has a right to exclude, as opposed to the only licensee. However, it it now settled that an exclusive licensee is truly one that has any right to exclude anyone, or is it a licensee that has the only rights to exclude the defendants?